BALANCED

SCORECARD
 What is Balanced Scorecard?
■ is a set of
performance
targets and
results that
shows how well
an organization
has performed
in meeting its
objectives
Timeline
■ 1987 - Art Schneiderman at Analog Devices
– a mid-sized semi-conductor
company; the Analog Devices
Balanced Scorecard.
– Schneiderman's design was similar
to what is now recognised as a "First
Generation" Balanced Scorecard
■1990 – 1992 – Robert S. Kaplan &
David P. Norton
– Research study; performance
measurement
■1996 – first book published The
Balanced Scorecard
– Second book published The Strategy
Focused Organization
■ Throughout the next 10 years, Norton and
Kaplan penned a number of articles and several
books, including “Strategy Maps” (2004),
“Alignment” (2006), and “The Execution
Premium” (2008).
■ Since the beginning, Norton and Kaplan—along
with other researchers—have been learning from
consultants who implemented the framework in
organizations around the world (and
organizations that implemented a BSC without
the help of a consultant). Many of their books
and articles hone in on the success of these
Four Key Takeaways About The
Balanced Scorecard
■ The Balanced Scorecard is a management
framework.
■ The Balanced Scorecard is flexible.
■ The Balanced Scorecard is adaptable.
■ To get the most out of your Balanced
Scorecard, you may need software.
 Characteristics
■ The characteristics of the balanced scorecard
and its derivatives is the presentation of a
mixture of financial and non-financial measures
each compared to a 'target' value within a single
concise report. The report is not meant to be a
replacement for traditional financial or
operational reports but a succinct summary that
captures the information most relevant to those
reading it.
 FINANCIAL
PERSPECTIVE

INTERNAL
CUSTOMER
STRATEGY BUSINESS
PERSPECTIVE
PERSPECTIVE

LEARNING &
GROWTH
PERSPECTIVE
CRITICAL SUCCESS FACTORS FINANCIA CUSTOME INTERNAL LEARNING
L R BUSINESS AND
GROWTH
Sales, cost, measures of
profit (operating income,
X
segment margin, etc.),
ROI, residual income, EVA
Quality X X
Delivery Time (customer
X
response time)
Customer Satisfaction X
Market Share X
New Markets
Environmental
X
Engagement
Productivity X
Manufacturing
Cycle Time and X
Throughput
Manufacturing
Cycle Efficiency X X
(MCE)
Employee
X
Empowerment
USES of a Balanced Scorecard

■ This approach extends performance evaluation

from merely looking at financial results to
formally incorporating measures that look at
customer satisfaction, internal business
processes, and the learning and growth potential
of the organization.
■ It helps to keep management focused on all of
all a company’s critical success factors, not just
its financial ones.
■ To communicate what the organization is trying to
accomplish
■ To align the day-to-day work that everyone is doing
with strategy
■ Prioritize projects, products, and services
■ Measure and monitor progress towards strategic
targets
USES of a Balanced Scorecard

■ Employs both financial and non-financial

measures
■ Creates linkages so that high level corporate
goals can be communicated all the way down
to the shop floor
■ Provides measurable objectives for non-
financial measures such as product quality,
rather than vague statements such as “we
■ Integrates all of the company’s goals into a
single performance measurement system, so
that an inappropriate amount of weight will not
be placed on any single goal
■ It connects the dots between big picture
strategy elements such as mission, vision,
core values, strategic focus areas and the
more operational elements such as objectives,
Anytown Hospital has just finished a two-day retreat
where they revised and updated their mission and
vision statements and drafted a strategic
MISSION plan. The
hospital’s vision-mission
VISION statement is:
Anytown Hospital is committed to
Our vision is to be providing the highest quality of
the community’s health care through service
provider of choice. excellence and compassionate
care.
During their retreat, the hospital board and leadership identified
the following strategies to pursue the upcoming year.

• Provide
• Operate in the black with 5% margin by increasing revenueshigh quality
• Motivate, recognize and retain staff services
• Increase utilization of
 The Anytown Hospital administrator enlisted the
help of the department managers to implement a
performance improvement process and Balanced
Scorecard. First, they took these strategies and
placed them into their appropriate perspectives
Financial
as follows:
Learning and Customer Perspectives
Growth Internal Process Perspective (Business &
Perspective (Staff Perspective (Patients & Development)
& Clinicians) (Quality & Safety) Community) • Operate in the
• Motivate, • Provide high • Increase black with 5%
recognize and quality services utilization of margin by
retain staff services increasing
revenues.
The next step is to determine the causal
linkages between the strategies and
develop a strategy map to visually portray
how your strategies support your mission
and vision. One of the primary reasons for
developing a strategy map is that it should
clearly communicate the connection
between strategies and mission and is an
excellent communication tool. The following
is Anytown Hospital’s strategy map.
Once you have your strategy map, you can
start identifying what actions you will take
to achieve strategies and how you will
measure the progress in accomplishing
each strategy. The following are a few
examples of actions you might implement
under each strategy and two measures that
could be used to track accomplishment of
each strategy. For purposes of this example,
both a lag (historical performance) and a
lead (predictor of future performance)
Financial Perspectives (Business &
Development): Operate in the black with 5%
margin by increasing revenues

ACTIONS:
Review billing and collections processes for
accuracy and timeliness Develop incentive
program for AR staff

MEASURES:
Net revenue increase over prior year (lag
indicator) Decrease net days in accounts
Customer Perspective (Patients &
Community): Increase utilization of services

ACTIONS:
Implement customer service Implement
marketing plan

MEASURES:
Patient satisfaction in 95%-tile (lag indicator)
Average daily census (lead indicator)
Learning and Growth Perspective (Staff &
Clinicians): Motivate, recognize and retain
staff

ACTIONS:
Develop performance based compensation
Develop peer recognition program
Review/update salary/benefits to ensure
competitiveness

MEASURES:
Employee satisfaction (lag indicator) Turnover
Internal Process Perspective (Quality &
Safety): Provide high quality services

ACTIONS:
Review ER patient flow process and
streamline Review ER staffing to ensure
adequacy Implement automated
pharmaceutical dispensing

MEASURES:
% ER patient triaged within 15 minutes of
arrival (lead indicator) Medication errors per
References

■ Weygandt, Kimmel, Kieso – Managerial Accounting

6th Edition
■ Jackson, Sawyers – Managerial Accounting 4th
Edition
■ Louderback, Holmen, Dominiak – Managerial
Accounting 9th Edition